Part of operating any business is the partnerships we forge. As a business owner, you continuously embrace new business partners and the global opportunities they represent. It’s very important that you are able to diminish any operational threats these relationships might cause.
As your company develops its risk management strategies include knowing what your business must examine before ever entering into a contract with a foreign partner. There are a number of critical components to consider when selecting a foreign business partner whether that partner is a distributor, joint venture partner, reseller, or agent.
Due diligence is always essential and at the very least should include:
- Credentials – Make a list of why you are selecting the particular foreign business partner and what their credentials are.
- Articulate Need – When forging the relationship with a new foreign business partner you need to articulate what your business needs are and what your expectations are from the foreign business partner.
- Personnel – You need to determine whether personnel will be provided by the foreign business partner and whether any of them are government officials.
- Ownership Structure – Is the foreign business partner state owned, government owned, privately owned, etc. and how will that affect your relationship.
- Financial Qualification – How stable is the foreign business partner on a financial level. If you will be relying on capital from this business partner you should obtain 3 to 5 years of financial records and they should be audited.
- Physical Facilities – What physical facilities will the foreign business partner be providing and who will provide the capital for the maintenance and upkeep of these buildings.
- Reputation – What is the reputation of the foreign business partner in its geographic sector market(s).
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A US based company is required to record and maintain due diligence throughout the relationship to ensure that your foreign partner is not violating the Foreign Corrupt Practices Act. All due diligence can be handled by your in house legal department.
Foreign business partners can be invaluable to your business but they are not without risk so you should exercise all precautions to ensure you and your business are protected legally and financially. Continue to monitor the situation regularly to ensure it remains a viable relationship over time.
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